Report: Buffett's Bond Investments Indicate He Fears Inflation

While the worries of most investors have shifted to deflation from inflation, Warren Buffett apparently isn’t one of them — at least as of June 30, anyway.

In the second quarter, his Berkshire Hathaway shortened the duration of its bond holdings, Bloomberg reports. The firm has all kinds of bonds, including Treasuries, municipals, corporate bonds and foreign bonds.

Coming after repeated warnings that deficit spending will ultimately spark inflation, the move points to a fear of price hikes on the part of Buffett.

“He would want to gradually make the duration decline because in an inflationary environment it’s a longer-term instrument that will be the most hit.”

Buffett has warned about the ramifications of the exploding U.S. debt burden.

“A country that continuously expands its debt as a percentage of GDP and raises much of the money abroad to finance that, at some point, it’s going to inflate its way out of the burden of that debt,” he told CNBC last year.

And he wrote in The New York Times, “Unchecked greenback emissions will certainly cause the purchasing power of currency to melt.”

The Congressional Budget Office projects that government debt will total 62 percent of GDP by Sept. 30. The Obama administration predicts the budget deficit will hit a record $1.47 trillion this year, about 10 percent of GDP.

But the slowdown of the economic recovery has many experts more worried about deflation than inflation. Growth slumped to 2.4 percent in the second quarter from 3.7 percent in the first quarter.

While the worries of most investors have shifted to deflation from inflation, Warren Buffett apparently isn t one of them at least as of June 30, anyway.
In the second quarter, his Berkshire Hathaway shortened the duration of its bond holdings, Bloomberg reports. The...